Big coffee companies aren't the only ones fighting for fans. Smaller companies are gaining momentum with new selling strategies. Corbis

September 15, 2010

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Starbucks, Dunkin' Donuts, and McDonald's have been waging a public battle over the hearts — and wallets — of coffee drinkers. But all the while, says Jason Notte at Newsweek, lower-profile coffee concerns have been making a killing by selling to home brewers and businesses, appealing to the ubiquitous "one cup commuter" and office workers looking for higher quality from the Keurig K-Cup single-serving machines in their communal kitchens. But as the price of coffee creeps up and the Big Three rethink their strategies, can single-cup purveyors afford to stay relevant? Here, an excerpt:

By the end of Starbucks' fiscal year last September, revenues were down nearly 6% and same-store sales had dropped 9%. McDonald's, however, didn't fare much better — revenues were down 7% in the U.S. and globally. Even while crediting its frappes for a 12% jump in second-quarter profits and 4% increase in same-store sales, McDonald's has somewhat softened its focus on in-store coffee — briefly annoying Jamba Juice (JMBA) with a foray into smoothies earlier this summer.

Where did all of that revenue go? Ask Green Mountain Coffee Roasters (GMCR), which was more than happy to let the restaurant chains lease space, spend on ads and knock themselves out — with $1 coffee under the golden arches or low-priced, low-grade Pike Place brew for Starbucks customers who still can't figure out the difference between American drip coffee and espresso.